By Joanna Norris, Partner at Ratio Law
Housing is a hot topic; there aren’t enough affordable homes, it’s getting harder to get a mortgage and wannabe first-time buyers are living with their parents for longer. Unsurprisingly, housing was top of the agenda for all of the main parties during their recent conferences – the final ones before the general election next year. As Labour, Conservative and Liberal Democrats go head-to-head, where does each party stand on housing and what will success for either in the general election mean for the industry?
More new homes
Labour leader Ed Miliband repeated his promise from last year to increase house building rates to 200,000 a year by 2020. A review was set up in 2013 to see how this target could be reached, however we’re yet to see evidence of the review or details on how Labour would achieve this goal.
In theory, if Labour could achieve this it would not only be great for house hunters, but the economy as a whole. A sudden increased demand for materials, combined with increased construction and greater supply to market would provide more jobs, greater tax returns and hopefully kickstart a greater trend in the right direction. However, as many of the smaller players in the sector are still struggling to find their feet again following the recession, support would be required to enable them take advantage of these opportunities. Ultimately, this means giving them access to finance. With the banks more cautious over lending though, it’s unclear where this would come from.
As part of the wider plan to create 300,000 homes a year, the Lib Dems announced it would build more social housing as well as five new garden cities, each with 50,000 new homes. The focus was on making housing accessible to all, not just those who are already on the property ladder. Treasury secretary Danny Alexander also suggested that central government should be given the power to build new homes, which would apply to both social housing and the private market. In terms of financing new housing, the Lib Dems promised to set up a housing investment bank to make it more straightforward to allocate public funds and encourage private backing to help with developments.
Conservative leader David Cameron also pledged to build new homes; specifically 100,000 new starter homes that would be offered at a discount of 20% to first-time buyers under the age of 40.
With first-time buyers in mind, Labour promised to double the number of people getting on to the property ladder – although failed to go into the details of how it would do this. In July, 30,000 first-time buyer obtained mortgages, and to help 60,000 first-time buyers – especially when it is becoming increasingly difficult to get a mortgage and interest rates are likely to increase – does seem quite a stretch.
Rich and poor
Labour announced that homes worth more than £2million would be liable for an annual charge if it came into government. Dubbed the ‘mansion tax’, it is thought this would raise £1.2billion, which would go towards the NHS. A lot of people have criticised the scheme, arguing it would penalise those who live in areas like London and the South East where property prices can be considerably higher than other parts of the country.
Instead of boosting revenues by taxing ‘the rich’, the Conservatives would save money by reducing financial support to ‘the poor’. If Cameron was successful in the general election, he said he would freeze working-age benefits until 2017, cut the benefit cap from £26,000 to £23,000, and scrap benefits for 18 to 21-year-olds.
While the country does need to simultaneously make savings and boost revenue, both parties’ responses to how to achieve this are bound to divide people.
Building our future
While their pledges are different, the parties are at least in agreement that we need more homes and more support for first-time buyers. However, there is a distinct lack of detail from all sides in terms of how exactly they would achieve their goals.
While low interest rates have helped to kick start the economy recently, they won’t stay down forever. When rates begin to rise, it will be even more important to make sure there is financial support and incentives available to drive the housing market – and the wider economy – further.
Whoever comes into power, with debts high and available funds stretched, there is only a limit to how much the government can do. Private investment will therefore be even more important and we need to make sure that we encourage investors by making the long-term returns on such investments attractive and secure.
What do you think of Labour’s, the Conservative’s and the Liberal Democrat’s housing policies? Is one stronger than the other, or do you think they’ve all got it wrong?